The Tata Technologies IPO opened for bidding on Wednesday. Till now, the IPO has been oversubscribed by 9.89 times. Analysts at KRChoksey and Chola Securities recommend subscribing to the much anticipated IPO.
In its note, Chola Securities assigned a “subscribe” rating for the stock. The analyst said that Tata Technologies has demonstrated a remarkable performance with an impressive compound annual growth rate (CAGR) of 36% in revenue and a notable 62% CAGR in Profit After Tax (PAT) from the fiscal year 2021 to the fiscal year 2023. The brokerage pointed out that this growth surpasses competitors such as KPIT Tech and L&T Tech.
One of the major risks associated with the company has been the dependence on a few top clients. Talking about it, analysts said that there has been a reduction in the share of revenue from the top 5 clients, decreasing from 64% in the second quarter of the fiscal year 2023 to 57.4% in the second quarter of the fiscal year 2024.
KRChoksey also added that on a yearly basis revenue from anchor clients (Tata Motors/JLR) formed 51% of revenues in FY21, for FY23 the number stood at ~40%, and for H1FY23 it was ~45%. As per the brokerage, the company has managed to secure global clientele and with its expertise managed to de-risk its portfolio
sequentially. “The diversification revenue bouquet will aid the company going forward providing room for growth,” the analysts added in the note.
The domestic brokerage firm also added that the Tata Group’s strong brand equity and corporate governance standards further bolster confidence in Tata Technologies’ prospective growth.
Domestic brokerage firms Ventura and IDBI Capital also have a subscribe rating on the IPO.
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